TAMURA, Japan, March 31 (Reuters) - For the first time since Japan's Fukushima nuclear disaster more than three years ago, residents of a small district 20 km (12 miles) from the wrecked plant are about to be allowed to return home.

The Miyakoji area of Tamura, a northeastern city inland from the Fukushima nuclear station, has been off-limits for most residents since March 2011, when the government ordered evacuations after a devastating earthquake and tsunami triggered a triple meltdown at the power plant.

Tuesday's reopening of Miyakoji will mark a tiny step for Japan as it seeks to recover from the Fukushima disaster and a major milestone for the 357 registered residents of the district - most of whom the city hopes will go back.

But homesick evacuees have mixed feelings about returning to Miyakoji, set amid rolling hills and rice paddies, a sign of how difficult the path back to normality will be for those forced from their homes by the accident.

Many families with young children are torn over what to do, one city official acknowledged.

"Young people won't return," said Kitaro Saito, a man in his early 60s, who opposed lifting the ban and had no intention of going home yet.

"Relatives are arguing over what to do" and friends disagree, he said, warming his hands outside his temporary home among rows of other one-room trailers in a Tamura parking lot. "The town will be broken up."

Saito said he wanted to go back to his large hillside house in Miyakoji, but thinks the government is using residents as "guinea pigs" to test whether larger returns are possible.

The 2011 crisis forced more than 160,000 people from towns near the Fukushima plant to evacuate. Around a third of them are still living in temporary housing scattered over Fukushima prefecture, their lives on hold as they wait for Japan to complete decontamination work.

Japan's $30 billion cleanup of radioactive fallout around Fukushima is behind schedule and not expected to achieve the long-term radiation reduction goal - 1 millisievert per year - set by the previous administration.

Across Fukushima prefecture, hundreds of workers are still scraping the top soil off of the ground, cutting leaves and branches off trees and hosing down houses with water to lower radiation levels.

Radiation levels in selected monitoring spots in Miyakoji ranged from 0.11 microsieverts to 0.48 microsieverts per hour, according to Tamura city's February results.

This was higher than the average 0.034 microsieverts per hour measured in central Tokyo on Monday, but comparable to background radiation of about 0.2 microsieverts per hour in Denver. A commercial flight between Tokyo and New York exposes passengers to about 10 microsieverts per hour.

Populations exposed to radiation typically have a greater chance of contracting cancers of all kinds after receiving doses above 100 millisieverts (100,000 microsieverts), according to the World Health Organisation. (Reporting by Mari Saito; Editing by William Mallard and Mike Collett-White)